What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-09-08 compared with 2021-06-08 · 141 added, 84 removed, 215 unchanged (51% of the section changed)

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Accordingly, the results of Vilebrequin, KLH, KLNA and Fabco are, and will be, included in our financial statements for the quarter ended or ending closest to G-III’s fiscal quarter end.

For example, with respect to our results for the three-month period ended April 30, 2021, the results of Vilebrequin, KLH, KLNA and Fabco are included for the three-month period ended March 31, 2021.

For example, with respect to our results for the six-month period ended July 31, 2021, the results of Vilebrequin, KLH, KLNA and Fabco are included for the six-month period ended June 30, 2021.

We account for our investment in each of KLH and KLNA using the equity method of accounting.

The Company’s retail operations segment uses a 52/53-week fiscal year.

The Company’s three-month periods ended April 30, 2021 and 2020 were each 13-week periods for the retail operations segment.

For fiscal 2022 and 2021, the three month period for the retail operations segment ended on May 1, 2021 and May 2, 2020 respectively.

For fiscal 2022 and 2021, the three and six-month period for the retail operations segment were each 13-week and 26-week periods, respectively, and ended on July 31, 2021 and August 1, 2020, respectively.

Various statements contained in this Form 10-Q, in future filings by us with the SEC, in our press releases and in oral statements made from time to time by us or on our behalf constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.

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● risks of expansion into foreign markets, conducting business internationally and exposures to foreign currencies;

● risks related to the recent adoption of a national security law in Hong Kong;

● risks related to the adoption of a national security law in Hong Kong;

● the need to successfully upgrade, maintain and secure our information systems;

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Our products are sold through a cross section of leading retailers such as Macy’s, Dillard’s, Hudson’s Bay Company, including their Saks Fifth Avenue division, Nordstrom, Kohl’s, TJX Companies, Ross Stores and Burlington.

We also sell our products over the web through retail partners such as macys.com, nordstrom.com and dillards.com, each of which has a substantial online business.

We also sell our products using digital channels through retail partners such as macys.com, nordstrom.com and dillards.com, each of which has a substantial online business.

In addition, we sell to pure play online retail partners such as Amazon and Fanatics.

We also distribute apparel and other products directly to consumers through our own DKNY and Karl Lagerfeld retail stores, as well as through our digital channels for the DKNY, Donna Karan, Karl Lagerfeld Paris, G.H.

We also distribute apparel and other products directly to consumers through our own DKNY and Karl Lagerfeld Paris retail stores, as well as through our digital channels for the DKNY, Donna Karan, Karl Lagerfeld Paris, G.H.

Bass, Andrew Marc and Wilsons Leather businesses.

In June 2020, we commenced the restructuring of our retail operations, including the closure of the Wilsons Leather, G.H.

In fiscal 2021, we restructured our retail operations and completed the closing of our Wilsons Leather, G.H.

Bass and Calvin Klein Performance stores.

We completed the closing of our Wilsons Leather, G.H.

Bass and Calvin Klein Performance stores in fiscal 2021.

We believe this restructuring will enable us to reduce our losses and re-position our retail operations with a goal of becoming a profitable contributor to our business.

We believe this restructuring will enable us to reduce our losses in our retail operations segment and re-position our retail operations with a goal of becoming a profitable contributor to our business.

We operate in fashion markets that are intensely competitive.

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In addition, the change in inventory valuation better aligns with the way we manage our business with a focus on the actual margin realized.

We have determined that it is impractical to apply this change in accounting principle retrospectively due to a lack of available information.

We have instead applied the change prospectively as of February 1, 2021.

We determined that it was impractical to apply this change in accounting principle retrospectively due to a lack of available information.

As a result, we applied the change prospectively as of February 1, 2021.

The cumulative adjustment as of February 1, 2021 was a decrease in both inventories and retained earnings of $0.3 million.

The change in accounting principle did not have a material effect on our condensed consolidated financial statements as of and for the three-month period ended April 30, 2021.

The change in accounting principle did not have a material effect on our condensed consolidated financial statements as of and for the three and six-month periods ended July 31, 2021.

We report based on two segments:

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Impact of COVID-19 Pandemic

The COVID-19 pandemic has affected businesses around the world for over a year.

Federal, state and local governments and private entities mandated various restrictions, including closing of retail stores and restaurants, travel restrictions, restrictions on public gatherings, stay at home orders and advisories, and quarantining of people who may have been exposed to the virus.

The COVID-19 pandemic has affected businesses around the world since the first quarter of fiscal 2021.

Federal, state and local governments in the United States and around the world, as well as private entities, mandated various restrictions, including closing of retail stores and restaurants, travel restrictions, restrictions on public gatherings, stay at home orders and advisories, and quarantining of people who may have been exposed to the virus.

The response to the COVID-19 pandemic negatively affected the global economy, disrupted global supply chains and created significant disruption of the financial and retail markets, including a disruption in consumer demand for apparel and accessories.

The COVID-19 pandemic continues to impact the global economy.

In the first quarter of fiscal 2022, consumer demand increased year-over-year, but remained below pre-pandemic levels.

In the first half of fiscal 2022, consumer demand increased year-over-year.

Even as businesses have reopened as governmental restrictions were loosened with respect to stay at home orders and various restrictions on the operation of retail businesses, the ultimate economic impact of the COVID-19 pandemic is uncertain.

We expect that our business operations and results of operations, including our net sales, earnings and cash flows, will continue to be adversely impacted in fiscal 2022 as

compared to our results of operations prior to the COVID-19 pandemic.

We expect significant improvements in our results of operations for fiscal 2022 as compared to fiscal 2021.

The spread of the Delta variant could result in the reimposition of restrictions on commercial and social activities that would adversely impact our business.

While we expect significant improvements in

our results of operations for fiscal 2022 as compared to fiscal 2021, we expect that our business operations and results of operations, including our net sales, earnings and cash flows, will continue to be adversely impacted in fiscal 2022 as a result of the COVID-19 pandemic.

The continued impact of COVID-19 remains uncertain and cannot be predicted.

The extent to which COVID-19 impacts our results will depend on continued developments in the public and private responses to the pandemic and the success and efficacy of efforts in the United States and around the world to vaccinate people against COVID-19.

New information may emerge concerning the severity of the outbreak and the spread of variants of the COVID-19 virus in locations that are important to our business.

Actions taken to contain COVID-19 or treat its impact may change or become more restrictive if additional waves of infections occur, or continue to occur, as a result of the loosening of governmental restrictions.

New information may emerge concerning the severity of the outbreak and the spread of variants, including the Delta variant, of the COVID-19 virus in locations that are important to our business.

Actions taken to contain COVID-19 or treat its impact may change or become more restrictive if additional waves of infections occur.

Industry Trends

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We also sell Karl Lagerfeld Paris products on our website, www.karllagerfeldparis.com.

In addition, we sell to pure play online retail partners such as Amazon and Fanatics.

In addition, we sell to pure play online retail partners such as Amazon and Fanatics and have made a minority investment in an e-commerce retailer.

A number of retailers are experiencing financial difficulties, which in some cases have resulted in bankruptcies, liquidations and/or store closings.

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We believe that our broad distribution capabilities help us to respond to the various shifts by consumers between distribution channels and that our operational capabilities will enable us to continue to be a vendor of choice for our retail partners.

Inbound Freight

The effects of the COVID-19 pandemic on the shipping industry have adversely affected our ability to ensure that we are able to import our product in a manner that allows for timely delivery to our customers.

Demand for container space has increased, as availability of container space has been reduced.

Demand for container space has increased, as availability of container space had been reduced.

This has caused contractual shipping rates to increase.

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We believe that the strength of our portfolio of global power brands will allow us to selectively raise prices to largely offset higher freight costs.

These supply chain challenges increased during our second fiscal quarter and, as a result, the receipt of a significant amount of orders has been delayed until our third fiscal quarter.

We have not as yet experienced order cancellations as a result of these delays as there is significant demand for our products from our customers.

We anticipant the current supply chain conditions will continue to cause our freight costs to increase and delays in receipts during the second half of our fiscal 2022 year.

Results of Operations

Three months ended April 30, 2021 compared to three months ended April 30, 2020

Net sales for the three months ended April 30, 2021 increased to $519.9 million from $405.1 million in the same period last year.

Three months ended July 31, 2021 compared to three months ended July 31, 2020

Net sales for the three months ended July 31, 2021 increased to $483.1 million from $297.2 million in the same period last year.

Net sales of our segments are reported before intercompany eliminations.

Net sales of our wholesale operations segment increased to $511.5 million for the three months ended April 30, 2021 from $378.9 million in the comparable period last year.

This increase is primarily the result of a $47.7 million increase in net sales of Calvin Klein licensed products, a $42.8 million increase in net sales of Tommy Hilfiger licensed products, a $27.7 million increase in net sales of our DKNY and Donna Karan products and a $5.8 million increase in net sales of Karl Lagerfeld licensed products.

Net sales of our wholesale operations segment increased to $467.0 million for the three months ended July 31, 2021 from $266.8 million in the comparable period last year.

This increase is primarily the result of a $62.2 million increase in net sales of Calvin Klein licensed products, a $43.8 million increase in net sales of our DKNY and Donna Karan products, a $20.5 million increase in net sales of Karl Lagerfeld Paris licensed products and a $15.4 million increase in net sales of Tommy Hilfiger licensed products.

In the prior year period, we experienced a significant decrease in net sales across substantially all of our brands primarily due to the effects of restrictions that began in March 2020 on business and personal activities imposed by governments in connection with the COVID-19 pandemic.

As a result, most of our retail partners closed their stores in North America, beginning in mid-March, 2020.

Most of our retail partners began to reopen a majority of their stores in North America beginning in June 2020, however, a majority of these stores continued to operate under government mandated restrictions.

The governmental restrictions imposed in connection with the COVID-19 pandemic resulted in significant increases in unemployment, a reduction in business activity and a reduction in consumer spending on apparel and accessories, all of which contributed to the reduction of our net sales which occurred during the majority of fiscal 2021.

During the three months ended April 30, 2021, substantially all stores operated by our retail partners were open and governmental restrictions were eased in most regions of the United States due to the reduction of the severity of the COVID-19 pandemic.

During the three months ended July 31, 2021, substantially all stores operated by our retail partners were open and governmental restrictions were eased in most regions of the United States due to the reduction of the severity of the COVID-19 pandemic.

The lessening of COVID-19 restrictions has resulted in an increase in business activity which has contributed to an increase in consumer spending on apparel and accessories.

Net sales of our retail operations segment decreased to $19.4 million for the three months ended April 30, 2021 from $33.9 million in the same period last year.

Governmental restrictions could be reimposed as a result of the spread of the Delta variant of COVID-19.

Net sales of our retail operations segment decreased to $27.3 million for the three months ended July 31, 2021 from $34.5 million in the same period last year.

This decrease is primarily due to the significant reduction in our store count as a result of the restructuring of our retail operations segment that resulted in the closure of our Wilsons, G.H.

Bass and Calvin Klein Performance stores during fiscal 2021.

The number of retail stores operated by us decreased from 257 at April 30, 2020 to 50 at April 30, 2021.

In addition, while the impact of the COVID-19 pandemic has lessened in this year’s first quarter compared to last year, reduced demand and store traffic, as well as domestic and international travel restrictions, continue to have a negative impact on net sales of our retail operations segment.

Gross profit was $195.5 million, or 37.6% of net sales, for the three months ended April 30, 2021, compared to $124.4 million, or 30.7% of net sales, in the same period last year.

The gross profit percentage in our wholesale operations segment was 36.3% in the three months ended April 30, 2021 compared to 29.6% in the same period last year.

The gross profit percentage in our retail operations segment was 50.3% for the three months ended April 30, 2021 compared to 35.9% for the same period last year.

Gross profit percentages for both our wholesale and retail operations segments in the prior year’s quarter were impacted by the negative effects of the COVID-19 pandemic on our net sales.

The gross profit percentage in our wholesale operations segment was negatively impacted last year as a result of recognizing certain fixed costs, primarily higher effective royalty rates, over the lower net sales last year.

Selling, general and administrative expenses decreased to $141.6 million in the three months ended April 30, 2021 from $154.6 million in the same period last year.

The decrease in expenses was primarily due to a decrease of $12.5 million in facility expenses as a result of the restructuring of our retail operations segment in fiscal 2021 and $9.6 million in bad debt expense related to allowances recorded against the outstanding receivables of certain department store customers in fiscal

These decreases were partially offset by a net $7.2 million increase in compensation expense, primarily from bonuses and share-based compensation.

As a result of the COVID-19 pandemic, the prior year’s period had no bonus accrual and a $3.9 million reversal in share-based compensation related to awards with performance conditions that became improbable to achieve.

In addition, contractual advertising related to increased sales of licensed product increased by $3.7 million.

Depreciation and amortization was $7.0 million for the three months ended April 30, 2021 compared to $9.9 million in the same period last year.

The number of retail stores operated by us decreased from 247 at July 31, 2020 to 50 at July 31, 2021.

Wilsons and G.H.

Bass stores, which were closed by the end of fiscal 2021, contributed $19.7 million of net sales for the three months ended July 31, 2020.

Net sales from the remainder of our retail operations segment increased by $12.5 million during the three months ended July 31, 2021 compared to the same period last year.

Gross profit was $192.9 million, or 39.9% of net sales, for the three months ended July 31, 2021, compared to $134.7 million, or 45.3% of net sales, in the same period last year.

The gross profit percentage in our wholesale operations segment was 38.3% in the three months ended July 31, 2021 compared to 46.3% in the same period last year.

In the prior year, the

gross profit percentage in our wholesale operations segment was positively impacted by the reversal of previously anticipated markdown accruals that were no longer necessary due to the reduction in sales to our retail customers, as well as a reversal of a portion of previously accrued royalty expense associated with royalty reductions that were provided by licensors.

The gross profit percentage in our retail operations segment was 51.9% for the three months ended July 31, 2021 compared to 32.5% for the same period last year.

The gross profit percentage in our retail operations segment was negatively impacted last year by the reduction of our net sales caused by COVID-19 related closures of our retail stores, increased promotional activity due to the COVID-19 pandemic and the restructuring of our retail operations segment which resulted in the liquidation of inventory.

Our wholesale and retail operating segments had gross profit percentages of 32.8% and 46.5%, respectively, for the three months ended July 31, 2019.

Both operating segments experienced increased gross profit percentages compared to the pre-pandemic quarter ended July 31, 2019 due to less promotional activity and strategic price increases in the current period, partially offset by increased freight costs.

Selling, general and administrative expenses increased to $146.8 million in the three months ended July 31, 2021 from $122.1 million in the same period last year.

The increase in expenses was primarily due to an increase of $29.7 million in compensation expense, primarily from bonus accruals and salaries.

As a result of the COVID-19 pandemic, the prior year’s period had no bonus accrual and salary expense declined as a result of employee furloughs, job eliminations and salary reductions.

The increase in expenses was also due to a $7.7 million increase in contractual advertising and a $6.2 million increase in third-party warehouse expenses both related to increased sales.

These increases were partially offset by a $17.0 million decrease in facility expenses and a $2.7 million decrease in professional fees primarily related to the retail restructuring that occurred in the prior year period.

Depreciation and amortization was $7.1 million for the three months ended July 31, 2021 compared to $9.7 million in the same period last year.

This decrease primarily relates to a reduction in capital expenditures during the COVID-19 pandemic.

Other income was $1.8 million in the three months ended April 30, 2021 compared to other loss of $2.1 million for the same period last year.

Other income was $2.0 million in the three months ended July 31, 2021 compared to $1.9 million for the same period last year.

We recorded $0.4 million of foreign currency losses during the three months ended July 31, 2021 compared to foreign currency income of $1.5 million during the same period last year and $1.8 million in income from unconsolidated affiliates during the three months ended July 31, 2021 compared to $0.4 million in income from unconsolidated affiliates in the same period last year.

In addition, we recorded other income of $0.6 million from non-refundable European government-backed grants received by Vilebrequin for COVID-19 relief.

Interest and financing charges, net, for the three months ended July 31, 2021 were $12.6 million compared to $9.2 million for the same period last year.

The increase is primarily due to the senior secured notes outstanding in the current quarter having a higher principal balance and interest rate than the term loan that was outstanding in the prior year period.

Income tax expense was $9.2 million for the three months ended July 31, 2021 compared to an income tax benefit of $3.7 million for the same period last year.

Our effective tax rate increased to 32.6% in the current year’s quarter from 19.6% in last year’s comparable quarter.

The prior year’s rate was positively impacted by the carryback of net operating losses for U.S.

federal income tax purposes to a taxable year with a 35% federal tax rate compared to the current federal tax rate of 21%.

In addition, due to the uncertainty related to the impact of the COVID-19 pandemic on our operations, we used a discrete effective tax rate method to calculate taxes last year.

We returned to our historical practice of using an annual effective tax rate based on full fiscal year income in the current year.

Six months ended July 31, 2021 compared to six months ended July 31, 2020

Net sales for the six months ended July 31, 2021 increased to $1.0 billion from $702.3 million in the same period last year.

Net sales of our segments are reported before intercompany eliminations.

Net sales of our wholesale operations segment increased to $978.5 million for the six months ended July 31, 2021 from $645.7 million in the comparable period last year.

This increase is primarily the result of a $109.8 million increase in net sales of Calvin Klein licensed products, a $86.5 million increase in net sales of our DKNY and Donna Karan products, a $43.1 million increase in net sales of Tommy Hilfiger licensed products and a $26.3 million increase in net sales of Karl Lagerfeld Paris licensed products.

activities imposed by governments in connection with the COVID-19 pandemic.

As a result, most of our retail partners closed their stores in North America, beginning in mid-March, 2020.

Most of our retail partners began to reopen a majority of their stores in North America beginning in June 2020 with a majority of these stores operating under government mandated limitations.

During the six months ended July 31, 2021, substantially all stores operated by our retail partners were open and governmental restrictions were eased in most regions of the United States due to the reduction of the severity of the COVID-19 pandemic.

The lessening of COVID-19 restrictions has resulted in an increase in business activity which has contributed to an increase in consumer spending on apparel and accessories.

Governmental restrictions could be reimposed as a result of the spread of the Delta variant of COVID-19.

Net sales of our retail operations segment decreased to $46.7 million for the six months ended July 31, 2021 from $68.4 million in the same period last year.

This decrease is primarily due to the significant reduction in our store count as a result of the restructuring of our retail operations segment that resulted in the closure of our Wilsons, G.H.

Bass and Calvin Klein Performance stores during fiscal 2021.

The number of retail stores operated by us decreased from 247 at July 31, 2020 to 50 at July 31, 2021.

Wilsons and G.H.

Bass stores, which were closed by the end of fiscal 2021, contributed $39.0 million of net sales for the six months ended July 31, 2020.

Net sales from the remainder of our retail operations segment increased by $17.3 million during the six months ended July 31, 2021 compared to the same period last year.

Gross profit was $388.3 million, or 38.7% of net sales, for the six months ended July 31, 2021, compared to $259.1 million, or 36.9% of net sales, in the same period last year.

The gross profit percentage in our wholesale operations segment was 37.2% in the six months ended July 31, 2021 compared to 36.5% in the same period last year.

The gross profit in the current year period was positively impacted by less promotional activity and strategic price increases, partially offset by increased freight costs.

The gross profit percentage in our retail operations segment was 51.3% for the six months ended July 31, 2021 compared to 34.2% for the same period last year.

Our wholesale and retail operating segments had gross profit percentages of 33.8% and 45.8%, respectively, for the six months ended July 31, 2019.

Both operating segments experienced increased gross profit precentages compared to the pre-pandemic period ended July 31, 2019 due to less promotional activity and strategic price increases in the current period, partially offset by increased freight costs.

Selling, general and administrative expenses increased to $288.4 million in the six months ended July 31, 2021 from $276.7 million in the same period last year.

The increase in expenses was primarily due to an increase of $36.9 million in compensation expense, primarily from bonus accruals.

As a result of the COVID-19 pandemic, the prior year’s period had a nominal bonus accrual.

The increase in expenses was also due to a $11.4 million increase in contractual advertising and a $7.6 million increase in third-party warehouse expenses related to increased sales.

These increases were partially offset by a $29.5 million decrease in facility expenses and a $3.9 million decrease in professional fees primarily related to the retail restructuring that occurred in the prior year period.

In addition, there was a $10.3 million decrease in bad debt expense primarily related to allowances recorded against the outstanding receivables of certain department store customers in the prior year period.

Depreciation and amortization was $14.1 million for the six months ended July 31, 2021 compared to $19.6 million in the same period last year.

This decrease primarily relates to a reduction in capital expenditures during the COVID-19 pandemic.

Other income was $3.8 million in the six months ended July 31, 2021 compared to an other loss of $0.1 million for the same period last year.

This change is primarily due to other income of $2.1 million from non-refundable European government-backed grants received by Vilebrequin for COVID-19 relief.

In addition, this change is also the result of recording $0.2 million of foreign currency losses during the three months ended April 30, 2021 compared to foreign currency losses of $1.5 million during the three months ended April 30, 2020 and $0.5 million in income from unconsolidated affiliates during the three months ended April 30, 2021 compared to $0.6 million of loss from unconsolidated affiliates in the same period last year.

Interest and financing charges, net, for the three months ended April 30, 2021 were $12.0 million compared to $10.4 million for the same period last year.

In addition, this change is also the result of recording $0.6 million of foreign currency losses during the six months ended July 31, 2021 compared to foreign currency income of $0.1 million during the six months ended July 31, 2020 and $2.3 million in income from unconsolidated affiliates during the six months ended July 31, 2021 compared to $0.2 million of loss from unconsolidated affiliates in the same period last year.

Interest and financing charges, net, for the six months ended July 31, 2021 were $24.6 million compared to $19.6 million for the same period last year.

Income tax expense was $10.3 million for the three months ended April 30, 2021 compared to income tax benefit of $16.4 million for the same period last year.

Our effective tax rate decreased to 28.0% in the current year’s quarter from 29.5% in last year’s comparable quarter.

Income tax expense was $19.5 million for the six months ended July 31, 2021 compared to an income tax benefit of $20.1 million for the same period last year.

Our effective tax rate increased to 30.0% in the current year’s period from 27.0% in last year’s comparable period.

This is primarily due to the carryback of net operating losses for U.S.

federal income tax purposes to a taxable year with a 35% federal tax rate compared to the current year federal tax rate of 21%.

In addition, due to the uncertainty related to the impact of the COVID-19 pandemic on our operations, we used a discrete effective tax rate method to calculate taxes last year.

We returned to our historical practice of using an annual effective tax rate based on full fiscal year income in the current year.

Liquidity and Capital Resources

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We rely on our cash flows generated from operations, cash and cash equivalents and the borrowing capacity under our revolving credit facility to meet the cash requirements of our business.

The primary cash requirements of our business are primarily related to the seasonal buildup in inventories, compensation paid to employees, payments to vendors in the normal course of business, capital expenditures, maturities of debt and related interest payments and income tax payments.

As of April 30, 2021, we had cash and cash equivalents of $396.3 million and availability under our revolving credit facility in excess of $460 million.

As of April 30, 2021, we were in compliance with all covenants under our debt agreements.

The cash requirements of our business are primarily related to the seasonal buildup in inventories, compensation paid to employees, payments to vendors in the normal course of business, capital expenditures, interest payments on debt obligations and income tax payments.

As of July 31, 2021, we had cash and cash equivalents of $510.0 million and availability under our revolving credit facility of approximately $400 million.

As of July 31, 2021, we were in compliance with all covenants under our debt agreements.

Senior Secured Notes

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The Intercreditor Agreement restricts the actions permitted to be taken by the Collateral Agent with respect to the Collateral on behalf of the holders of the Notes.

The Notes are also subject to the terms of the seller note subordination agreement which governs the relative rights of the secured parties in respect of the Seller Note (as defined therein), the ABL Facility and the Notes.

At any time prior to August 15, 2022, we may redeem some or all of the Notes at a price equal to 100% of the principal amount of the Notes redeemed plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date plus a “make-whole” premium, as described in the Indenture.

The Notes are also subject to the terms of the LVMH Note subordination agreement which governs the relative rights of the secured parties in respect of the LVMH Note, the ABL Facility and the Notes.

plus a “make-whole” premium, as described in the Indenture.

On or after August 15, 2022, we may redeem some or all of the Notes at any time and from time to time at the redemption prices set forth in the Indenture, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.

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and Donna Karan Studio LLC (the “Guarantors”), are Loan Guarantors under the ABL Credit Agreement.

The ABL Credit Agreement refinances, amends and restates the Amended Credit Agreement, dated as of December 1, 2016 (as amended, supplemented or otherwise modified from time to time prior to August 7, 2020, the “Prior Credit Agreement”), by and among the Borrowers and the Loan Guarantors (each as defined therein) party thereto, the lenders from time to time party thereto, and JPMorgan Chase Bank, N.A., in its capacity as the administrative agent thereunder.

The ABL Credit Agreement refinanced, amended and restated the Amended Credit Agreement, dated as of December 1, 2016 (as amended, supplemented or otherwise modified from time to time prior to August 7, 2020, the “Prior Credit Agreement”), by and among the Borrowers and the Loan Guarantors (each as defined therein) party thereto, the lenders from time to time party thereto, and JPMorgan Chase Bank, N.A., in its capacity as the administrative agent thereunder.

The Prior Credit Agreement provided for borrowings of up to $650 million and was due to expire in December 2021.

The ABL Credit Agreement extends the maturity date to August 2025, subject to a springing maturity date if, subject to certain conditions, the LVMH Note is not refinanced or repaid prior to the date that is 91 days prior to the date of any relevant payment thereunder.

The ABL Credit Agreement extended the maturity date to August 2025, subject to a springing maturity date if, subject to certain conditions, the LVMH Note is not refinanced or repaid prior to the date that is 91 days prior to the date of any relevant payment thereunder.

Amounts available under the ABL Credit Agreement are subject to borrowing base formulas and overadvances as specified in the ABL Credit Agreement.

Borrowings bear interest, at the Borrowers’ option, at LIBOR plus a margin of 1.75% to 2.25% or an alternate base rate margin of 0.75% to 1.25% (defined as the greatest of (i) the “prime rate” of JPMorgan Chase Bank, N.A.

from time to time, (ii) the federal funds rate plus 0.5% and (iii) the LIBOR rate for a borrowing with an interest period of one month) plus 1.00%, with the applicable margin determined based on Borrowers’ availability under the ABL Credit Agreement.

the ABL Credit Agreement.

The ABL Credit Agreement is secured by specified assets of the Borrowers and the Guarantors.

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In certain circumstances, the revolving credit facility also requires us to maintain a fixed charge coverage ratio, as defined in the agreement, not less than 1.00 to 1.00 for each period of twelve consecutive fiscal months of the Company.

As of April 30, 2021, the Company was in compliance with these covenants.

As of April 30, 2021, we had no borrowings outstanding under the ABL Credit Agreement.

There were no borrowings under the ABL Credit Agreement during the three months ended April 30, 2021.

As of July 31, 2021, the Company was in compliance with these covenants.

As of July 31, 2021, we had no borrowings outstanding under the ABL Credit Agreement.

The ABL Credit Agreement also includes amounts available for letters of credit.

As of April 30, 2021, there were outstanding trade and standby letters of credit amounting to $10.9 million and $4.0 million, respectively.

As of July 31, 2021, there were outstanding trade and standby letters of credit amounting to $9.2 million and $4.0 million, respectively.

At the date of the refinancing of the Prior Credit Agreement, we had $3.3 million of unamortized debt issuance costs remaining from the Prior Credit Agreement.

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This discount is being amortized as interest expense using the effective interest method over the term of the LVMH Note.

G-III Leather granted to LVMH a security interest in specified collateral to secure our payment and performance of our obligations under the LVMH Note that is subordinate and junior to the security interest granted by us with respect to our obligations under the revolving credit facility and Term Loan.

In connection with the issuance of the LVMH Note, LVMH entered into (i) a subordination agreement providing that our obligations under the LVMH Note are subordinate and junior to our obligations under the revolving credit facility and Term Loan and (ii) a pledge and security agreement with us and our subsidiary, G-III Leather, pursuant to which we and G-III Leather granted to LVMH a security interest in specified collateral to secure our payment and performance of our obligations under the LVMH Note that is subordinate and junior to the security interest granted by us with respect to our obligations under the revolving credit facility and Term Loan.

Unsecured Loans

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Interest on the outstanding principal amount of the unsecured loans accrues at a fixed rate equal to 0% to 2.0% per annum, payable on either a quarterly or monthly basis.

As of April 30, 2021, TRB had an aggregate outstanding balance of €7.5 million under these various unsecured loans.

As of July 31, 2021, TRB had an aggregate outstanding balance of €7.5 million under these unsecured loans.

Overdraft Facilities

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As part of a COVID-19 relief program, TRB and its subsidiaries have also entered into several state backed overdraft facilities with UBS Bank in Switzerland for an aggregate of CHF 4.7 million at varying interest rates of 0% to 0.5%.

As of April 30, 2021, TRB had an aggregate €3.3 million drawn under these various facilities.

As of July 31, 2021, TRB had an aggregate €3.8 million drawn under these facilities.

Outstanding Borrowings

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The primary sources to meet our operating cash requirements have been borrowings under this credit facility and cash generated from operations.

We had no borrowings outstanding under our revolving credit facility at April 30, 2021 and had $500.0 million of borrowings outstanding at April 30, 2020.

We borrowed $500 million in March 2020 as a precautionary measure in connection with disruptions caused by the COVID-19 pandemic and repaid those borrowings in May and June 2020.

We had $400 million in borrowings outstanding under the Notes at April 30, 2021.

We had $300 million in borrowings under the Term Loan Credit Agreement at April 30, 2020.

Our contingent liability under open letters of credit was approximately $14.9 million and $15.8 million at April 30, 2021 and 2020, respectively.

In addition to the amounts outstanding under these two loan agreements, at April 30, 2021 and 2020, we had $125 million of face value principal amount outstanding under the LVMH Note.

As of April 30, 2021 and 2020, we had an aggregate of €7.5 million ($8.8 million) and €4.1 million ($4.5 million) outstanding under Vilebrequin’s unsecured loans.

As of April 30, 2021, we also had €3.3 million ($3.9 million) outstanding under Vilebrequin’s overdraft facilities.

We had cash and cash equivalents of $396.3 million on April 30, 2021 and $616.2 million on April 30, 2020.

We had no borrowings outstanding under our revolving credit facility at July 31, 2021 and 2020.

We had $400 million in borrowings outstanding under the Notes at July 31, 2021.

The Notes repaid the $300 million in borrowings under the Term Loan Credit Agreement that were outstanding at July 31, 2020.

Our contingent liability under open letters of credit was approximately $13.2 million and $10.4 million at July 31, 2021 and 2020, respectively.

In addition to the amounts outstanding under these two loan agreements, at July 31, 2021 and 2020, we had $125 million of face value principal amount outstanding under the LVMH Note.

As of July 31, 2021 and 2020, we had an aggregate of €7.5 million ($8.9 million) and €5.7 million ($6.4 million) outstanding under Vilebrequin’s unsecured loans.

As of July 31, 2021 and 2020, we also had €3.8 million ($4.5 million) and €3.1 million ($3.5 million) outstanding under Vilebrequin’s overdraft facilities.

We had cash and cash equivalents of $510.0 million at July 31, 2021 and $252.8 million at July 31, 2020.

Share Repurchase Program

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Share repurchases may take place on the open market, in privately negotiated transactions or by other means, and would be made in accordance with applicable securities laws.

No shares were repurchased during the three months ended April 30, 2021.

As of June 3, 2021, we had 2,949,362 authorized shares remaining under this program and 48,376,794 shares of common stock outstanding.

No shares were repurchased during the three months ended July 31, 2021.

As of August 31, 2021, we had 2,949,362 authorized shares remaining under this program and 48,566,107 shares of common stock outstanding.

Cash from Operating Activities

We generated $47.0 million in cash from operating activities during three months ended April 30, 2021, primarily as a result of our net income of $26.3 million and non-cash charges in the aggregate amount of $19.9 million relating primarily to operating lease costs of $10.3 million, depreciation and amortization of $7.0 million and share-based compensation of $2.5 million.

We also generated cash from operating activities as a result of a decrease of $69.8 million in inventories.

These items were offset, in part, by decreases of $43.8 million in accounts payable and accrued expenses, $11.5 million in operating lease liabilities and $10.4 million in customer refund liabilities, as well as an increase in accounts receivable of $16.7 million.

The decrease in accounts payable and accrued expenses is primarily attributable to vendor payments related to inventory purchases and the payment of year-end bonuses in our first fiscal quarter.

Our customer refund liabilities and inventory decreased because we experience lower sales level in our first and second quarters than in our third and fourth quarters.

We generated $193.8 million in cash from operating activities during six months ended July 31, 2021, primarily as a result of our net income of $45.5 million and non-cash charges in the aggregate amount of $43.2 million relating primarily to operating lease costs of $20.6 million, depreciation and amortization of $14.1 million and share-based compensation of $8.4 million.

We also generated cash from operating activities as a result of an increase of $126.5 million in accounts payable and accrued expenses and a decrease of $107.7 million in accounts receivable.

These items were offset, in part, by an increase of $82.8 million in inventories and decreases of $36.3 million in customer refund liabilities and $22.6 in operating lease liabilities.

The changes in operating cash flow items are consistent with our seasonal pattern of building up inventory for the fall shipping season resulting in the increases in inventory and accounts payable.

The fall shipping season begins during the latter half of our second quarter.

Our accounts receivable and customer refund liabilities decreased because we experience lower sales levels in our first and second quarters than in our third and fourth quarters.

Our typical seasonal patterns were disrupted last year due to the COVID-19 pandemic.

Cash from Investing Activities

We used $2.7 million of cash in investing activities during three months ended April 30, 2021 for capital expenditures.

Capital expenditures in the period primarily related to infrastructure and information technology expenditures and additional fixturing costs at department stores.

We used $32.5 million of cash in investing activities during six months ended July 31, 2021, primarily as a result of a $25.0 million minority investment in an e-commerce retailer.

In addition, we also had $7.5 million in capital expenditures primarily related to infrastructure and information technology expenditures and additional fixturing costs at department stores.

Cash from Financing Activities

Net cash provided by financing activities was $1.1 million during three months ended April 30, 2021 primarily as a result of net borrowings under Vilebrequin’s overdraft facilities.

Net cash used in financing activities was $2.6 million during six months ended July 31, 2021 primarily as a result $4.3 million for taxes paid in connection with net share settlements, partially offset by $1.7 million of net borrowings under Vilebrequin’s overdraft facilities.

Critical Accounting Policies

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The accounting policies and related estimates described in our Annual Report on Form 10-K for the year ended January 31, 2021 are those that depend most heavily on these judgments and estimates.

As of April 30, 2021, there have been no material changes to our critical accounting policies, other than the change in our retail inventory valuation method from the lower of cost or market as determined by the retail inventory method to the lower of cost or market under the weighted average cost method as discussed in Note 1 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

As of July 31, 2021, there have been no material changes to our critical accounting policies, other than the change in our retail inventory valuation method from the lower of cost or market as determined by the retail inventory method to the lower of cost or market under the weighted average cost method as discussed in Note 1 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Quantitative and Qualitative Disclosures About Market Risk.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis